Big GOP tax bill would cut rates - but also popular breaks

Big GOP tax bill would cut rates - but also popular breaks

November 3rd, 2017 by Associated Press in Breaking News

President Donald Trump holds an example of what a new tax form may look like during a meeting on tax policy with Republican lawmakers in the Cabinet Room of the White House, Thursday, Nov. 2, 2017, in Washington, with House Speaker Paul Ryan, R-Wis., and Chairman of the House Ways and Means Committee Rep. Kevin Brady, R-Texas, right. (AP Photo/Evan Vucci)

Photo by Associated Press /Times Free Press.

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POLL: Will the GOP tax plan benefit the middle class?

WASHINGTON (AP) — With fanfare and a White House kickoff, House Republicans unfurled a broad tax-overhaul plan Thursday that would touch virtually all Americans and the economy's every corner, mingling sharply lower rates for corporations and reduced personal taxes for many with fewer deductions for home-buyers and families with steep medical bills.

The measure, which would be the most extensive rewrite of the nation's tax code in three decades, is the product of a party that faces increasing pressure to produce a marquee legislative victory of some sort before next year's elections. GOP leaders touted the plan as a sparkplug for the economy and a boon to the middle class and christened it the Tax Cuts and Jobs Act.

"We are working to give the American people a giant tax cut for Christmas," President Donald Trump said in the Oval Office. The measure, he said, "will also be tax reform, and it will create jobs."

It would also increase the national debt, a problem for some Republicans. And Democrats attacked the proposal as the GOP's latest bonanza for the rich, with a phase-out of the inheritance tax and repeal of the alternative minimum tax on the highest earners — certain to help Trump and members of his family and Cabinet, among others.

Area lawmakers react to plan

Area lawmakers respond to U.S. House tax-overhaul plan:

U.S. Sen. Bob Corker, R-Tenn.: "I cannot stress enough that what I care about is doing this right and implementing sound policy. As I have made clear from the beginning of this debate, it is my hope that the final legislation – while allowing for current policy assumptions and reasonable dynamic scoring – will not add to the deficit, sets rates that are permanent in nature, and closes a minimum of $4 trillion in loopholes and special interest deductions."

U.S. Sen. Lamar Alexander, R-Tenn.: "You don't need to be an accountant to know that our tax code is too complicated, takes too many dollars away from Tennesseans and makes it harder to create good-paying jobs. The House ... is taking a critical step today toward enacting tax reform this year and I look forward to reviewing their proposal. I will continue working with President Trump, Chairman Hatch, and my colleagues in the House and Senate to help create a simpler and fairer pro-growth tax system that will keep more money in Tennesseans' pockets and grow Tennessee jobs."

U.S. Rep. Chuck Fleischmann, R-Tenn.: "This plan greatly simplifies our tax code and will ensure hardworking Tennesseans keep more money in their pockets. Additionally, this plan finally addresses the burdensome taxes on our businesses that have stifled growth and led to more and more of our jobs being shipped overseas. ... The Tax Cuts and Jobs Act presents a tax plan that works for, not against, American families and businesses."

U.S. House Budget Committee Chairman Diane Black, R-Tenn.: "Today, we took action to present comprehensive tax relief that lowers rates, simplifies the code and gets rid of loopholes so that American families get relief from the crushing burden of high taxes. ... Our goal has always been to relieve the tax burden on middle income families so they can save for the future with a simpler and fairer system."

President Donald Trump: "I called Diane Black and you came through, Diane."

U.S. Rep. Steve Cohen, D-Tenn.: "We worked hard to get [state] sales taxes deductible. The GOP plan eliminating the deductibility of sales taxes would take money out of Tennessee. If you can't deduct it, it goes to Washington."

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"If you're the wealthiest 1 percent, Republicans will give you the sun, the moon and the stars, all of that at the expense of the great middle class," said House Minority Leader Nancy Pelosi, D-Calif.

And there was enough discontent among Republicans and business groups to leave the legislation's fate uncertain in a journey through Congress that leaders hope will deposit a landmark bill on Trump's desk by year's end.

Underscoring problems ahead, some Republicans from high-tax Northeastern states expressed opposition to the measure's elimination of the deduction for state and local income taxes. Senate Finance Committee Chairman Orrin Hatch of Utah called the House measure "a great starting point" but said it would be "somewhat miraculous" if its corporate tax rate reduction to 20 percent — a major Trump goal — survived. His panel plans to produce its own tax package in the coming days.

The House Republicans' plan, which took them months to craft in countless closed-door meetings, represents the first step in their effort to reverse what's been a politically disastrous year in Congress. Their drive to obliterate President Barack Obama's health care law crashed, and GOP lawmakers concede that if the tax measure collapses, their congressional majorities are at risk in next November's elections.

The package's tax reductions would outweigh its loophole closers by a massive $1.5 trillion over the coming decade. Many Republicans were willing to add that to the nation's soaring debt as a price for claiming a resounding tax victory. But it was likely to pose a problem for others — one of several brushfires leaders will need to extinguish to get the measure through Congress.

Republicans must keep their plan's shortfall from spilling over that $1.5 trillion line or the measure will lose its protection against Democratic Senate filibusters, bill-killing delays that take 60 votes to overcome. There are just 52 GOP senators and unanimous Democratic opposition is likely.

The bill would telescope today's seven personal income tax brackets into just four: 12 percent, 25 percent, 35 percent and 39.6 percent.

— The 25 percent rate would start at $45,000 for individuals and $90,000 for married couples.

— The 35 percent rate would apply to family income exceeding $260,000 and individual income over $200,000, which means many upper-income families whose top rate is currently 33 percent would face higher taxes.

— The top rate threshold, now $418,400 for individuals and $470,700 for couples, would rise to $500,000 and $1 million.

The standard deduction — used by people who don't itemize, around two-thirds of taxpayers — would nearly double to $12,000 for individuals and $24,000 for couples. That's expected to encourage even more people to use the standard deduction with a simplified tax form Republicans say will be postcard-sized.

Many middle-income families would pay less, thanks to the bigger standard deduction and an increased child tax credit. Republicans said their plan would save $1,182 in taxes for a family of four earning $59,000, but features like phase-outs of some benefits suggest their taxes could grow in the future.

"The plan clearly chooses corporate CEOs and hedge fund managers over teachers and police officers," said Rep. Bill Pascrell, D-N.J.

One trade-off for the plan's reductions was its elimination of breaks that millions have long treasured. Gone would be deductions for people's medical expenses — especially important for families facing nursing home bills or lacking insurance — and their ability to write off state and local income taxes. The mortgage interest deduction would be limited to the first $500,000 of the loan, down from the current $1 million ceiling.

Led by Rep. Kevin Brady, R-Texas, chairman of the House Ways and Means Committee, the authors retained the deductibility of up to $10,000 in local property taxes in a bid to line up votes from Republicans from the Northeast. The panel planned to begin votes on the proposal next Monday.

"It's progress, but I want more," said Rep. Leonard Lance, R-N.J., who represents one of his state's wealthier, higher-cost districts and wants the entire property tax deduction restored.

On the business side, the House would drop the top rate for corporations from 35 percent to 20 percent. American companies operating abroad would pay a 10 percent tax on their overseas subsidiaries' profits. Cash that those firms have amassed abroad but now return home would face a one-time 12 percent tax.

Also reduced to 25 percent would be the rate for many "pass-through" businesses, whose profits are taxed at the owners' individual rate.

But some of those companies would face higher rates. Sen. Ron Johnson, R-Wis., said that disparity was "just not acceptable," and the National Federation of Independent Business said it opposed the bill because it "does not help most small businesses."

The U.S. Chamber of Commerce praised the measure but said "a lot of work remains to be done." The group's chief policy officer, Neil Bradley, said pass-throughs were one concern.

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